Sunday, 12 April 2015

36 Rafales to join air force in two years, but no clarity on original 126 fighters

By Ajai Shukla

Business Standard, 12th Apr 15

Questions swirl over the Indo-French announcement in Paris
yesterday that India had requested for 36 Rafale fighters in flyaway condition,
to remedy a dire shortfall of fighters in the Indian Air Force (IAF).

On Saturday morning, Defence Minister Manohar Parrikar told
PTI in Goa that these 36 fighters would join IAF service within two years.

A key question this raises is: are these 36 fighters in
addition to the 126 fighters being currently negotiated between Dassault and
the Indian defence ministry under the medium multi-role combat aircraft (MMRCA)
tender, floated in 2007, which still remains mired in disagreement?

The Indo-French joint statement, issued in Paris late on
Friday night, indicates the 36 fighters requested by Prime Minister Narendra
Modi are separate from the 126 being processed under the MMRCA contract.

The statement says Mr Modi and President Francois Hollande “agreed
to conclude an Inter-Governmental Agreement for supply of the aircraft on terms
that would be better than conveyed by Dassault Aviation as part of a separate
process underway…”

It said the delivery of the 36 Rafales “would be in [a] time-frame
that would be compatible with the operational requirement of IAF.”

An Inter-Governmental Agreement on a particular acquisition
exempts it from the constraining rules that govern defence ministry
procurement.

French media sources say the 36 Rafales agreed on Friday
would be adjusted against the “options” clause of the Indian tender, which
allows for buying 63 additional fighters, over and above the 126 Rafales in the
basic tender.

If that were true, the number of Rafales that will sport IAF
roundels has already risen from 126 (six squadrons) to at least 162 (eight
squadrons). If the options clause is eventually exercised in full, the IAF will
operate 189 Rafales, i.e. nine squadrons.

With the IAF now down to 34 squadrons against the authorized
42, the induction of nine Rafale squadrons would assuage concerns about a
strength shortfall in a two-front war. These would add to the 4-5 Sukhoi-30MKI
squadrons that would additionally be inducted by 2018-19, even as MiG-21 and
MiG-27 squadrons are retired.

“The Indian Air Force will get minimum oxygen [relief] it
required with this deal,” said Parrikar.

Yet, there is skepticism, especially within Hindustan
Aeronautics Ltd (HAL), about whether the tender for 126 Rafales could survive
the purchase of 36 fighters in flyaway condition. “The defence ministry was
doubtful about being able to afford even 126 aircraft; how can it now suddenly
afford 162 Rafales?” wonders a senior HAL official.

The need for more fighters has been extensively debated, but
the stumbling block has been the Rafale’s forbidding cost. Worryingly, the
government is silent on what it is paying, nor do the 20 agreements signed in
Paris on Friday include anything on the 36 aircraft being bought.

By conventional contracting norms, an “options clause”
allows the buyer to procure additional equipment at the same price as the
primary contract.

In this case, the pricing has been effectively reversed.
Fixing the cost of the 36 additional “options” in advance would effectively pre-determine
the outcome of the ongoing negotiations for 126 Rafales, i.e. the primary MMRCA
contract.

Even so, Parrikar today lauded the purchase, terming it “a
great decision taken by Prime Minister Narendra Modi on better terms and
conditions.”

Prominent amongst the unanswered questions is how the
purchase of flyaway fighters squares with Mr Modi’s “Make in India” rhetoric.
After the prime minister visiting the Airbus facility at Toulouse on Friday,
Airbus chief, Tom Enders stated: “We support Prime Minister Modi’s ‘Make in
India’ call and are ready to manufacture in India, for India and the world.”

Yet, the one major deal agreed during this visit saw India
shifting away from an ongoing negotiation to manufacture in India, instead
going in for a multi-billion dollar purchase that is critical to the survival
of Dassault, a company that supports 11,600 French jobs and reported revenue
last year of Euro 3.68 billion.

In the absence of official information, there is unconfirmed
speculation about the Rafale deal being a quid pro quo for nuclear technology,
particularly a miniaturized reactor that could power India’s emerging nuclear
submarine force.

What is clear is that Paris has ticked every major button of
strategic partnership during this visit. The joint statement mentions: “France
reaffirms its support for India’s candidature for a permanent membership of the
UN Security Council without further delay… France and India committed to
continuing to work jointly towards India's accession to the multilateral export
control regimes, namely, the Nuclear Suppliers Group (NSG), the Missile
Technology Control Regime (MTCR), the Australia Group, and the Wassenaar
Arrangement. France especially reaffirmed its strong and active support to building
consensus among regimes’ members on this issue.”

9 comments:

OK. Good that IAF has got Rafale now, through direct purchase. At least, the itch is over.

Now, regarding the single engine fighter, will LCA-Tejas Mk-1 get some good orders for about 5-6 squadrons for its production line justification?? It can even be the trainer version for LIFT training. But orders matter more now as they will determine the annual rate of production - from eight/yr to 24/yr.

Or IAF will wait till 2025 when "Tejas Mk-2 onleeeee" comes after IOC ??? Is IAF going to wait for another stretched delay to justify another import? Or it will take control of LCA project and help develop at least one combat fighter of Indian origin? I hope I am not looking at HAF MARUT repeat ??

And what if this was positive for Make in India? Make in India has been happening for decades to no concrete result for years. What does the making of su30 really bring to india? If Russia decided to stop supplies would india be able to support the fleet alone let alone manufacture new aircraft? Does it add to India's capacity to develop a new aircraft? Today india's system doesn't even allow it to manage the timely procurement of material for its defence let alone development of its own.From all accounts the price of indian built Rafale s would've been higher than French built ones because of investment required. A rewamped ToT should be an opportunity to identify areas where ToT is really important and limit investment required to strategic areas. It would also be used to build an indian private sector supply chain. Offsets could be used to get french support on the Amca / lca mk2 and related engine development. A not least restructure Hal and Mod which is probably the most important thing to do.

Lastly you really need to stop the misinformation about Dassault being in the doldrums. They're not and are profitable with a solid base of Falcon business jets and guaranteed orders for the Rafale!

Ajay bhai what you say is right. Its a matter of only speculation and conjecture that India would go further ahead with Rafales. What if NDA put a full stop and opt for other alternatives that would suit make in India program. Typhoon is still in the reckoning if their offer can match the PM modiji initiative. India can have best of both. Rafale looks predominantly a A2G fighter with terrain huging capabilities and Typhoon being A2A fighter. India has operated a mix of fighters. IAF has the skill to pull it off.

"Make in India" by HAL is a joke ! It means sharpening the screw driver skills of HAL staff and nothing more. Why should India pay twice the price for suvh screw driver technology to Dassault when HAL staff have neither the capacity nor the intention of truly absorbing any technology transfer effort- so why waste time and money ? TOT only makes sense if initiatives are pursued through competent entities such as L&T or TATAs - not otherwise ! End of story.

India, Russia & China remain the only countries in the world that still have Govt. entities involved in manufacturing defense equipment. All other countries have moved on and trust private enterprises to do end to end development with much better results. India needs to change its outlook vis-a-vis PSU monopolies. Tejas MK-II should be the last project that HAL should be entrusted with and then they should be sold off to the highest bidder.

What Modi has achieved was unimaginable under the UPA govt. He has broken an impasse in a manner only he can and has shown a way out which is stupendous. That is why the whole world is beginning to take notice and every world leader wants to shake his hand and do deals with Modi.

HAL does not need to be sold off to anybody. Maybe hived off into distinct cost centres at best and then aggressively tackle the poorly performing areas.

The mindset and work culture should definitely change. The fact is that the deadline when IAF would have been satisfied with the LCA delivery schedule has passed. Now it looks more like a matter of 'Are we there yet already?'... 'Are we there yet already?'.

Having at least the LCA in hand would have brought the government more time and bargaining space with Dassault.

Alas, Whats done is done! They need to get those LCA's out the door quickly or is it out the hangars?.